A Chinese navy nuclear submarine takes part in a nuclear safety drill Oct. 27 in Qingdao in east China's Shandong province. (AP)

WASHINGTON — A U.S. congressional advisory panel sounded a warning Wednesday over China’s military buildup, predicting it may be able to field the largest fleet of modern submarine and combatant ships in the West Pacific by 2020.

The U.S.-China Economic and Security Review Commission said China’s military modernization is altering the balance of power in the Asia-Pacific, challenging decades of U.S. pre-eminence.

The commission, which released its wide-ranging annual report Wednesday, advises Congress on the national security implications of the relationship between the two world powers. It also examines cyber intrusions from China, the trade and economic relationship with the U.S. and China’s relations with the wider world.

The commission’s primary recommendation is that Congress fund navy shipbuilding and increase the U.S. navy’s operational presence region in support of the Defense Department’s goal to base 60 percent of its warships in the Asia-Pacific by 2020, up from about 50 percent currently.

That’s a key priority of the Obama administration’s diplomatic and military rebalance to Asia, after a decade of war in Afghanistan and Iraq.

The commission said it welcomes the policy, but added: “There is growing concern among U.S. allies and partners that the Department of Defense will be unable to follow through on its commitment to the rebalance due to declining defense budget and continuing security challenges elsewhere.”

The panel also urges the U.S. improve air and maritime capabilities of allies in the region.

Last year, the Chinese Foreign Ministry accused the commission of “indulging in cold war mentality.” Beijing says it has no offensive intent, and accuses Washington of trying to contain it.

The U.S. still far outstrips China in military spending, but in Asia faces a greater burden in fielding forces far from its own shores.

The report’s assessment of China’s naval capabilities draws on information from think tanks and U.S. naval intelligence. It says China is known to be building seven classes of vessel, including nuclear and diesel submarines, destroyers and other warships. It expects the naval modernization will continue for the “foreseeable future.”

China is also advancing its capabilities in space, which is viewed as critical because of the use of communication satellites for intelligence and modern warfare.

For the first time, there are public indications China may be developing the ability to target satellites at the high altitude used by the U.S. global positioning system and many military and intelligence satellites, according to the report.

China, however, described a May 2013 suborbital rocket launch it conducted as part of a high-altitude scientific experiment.